Identification of investment opportunities in urban regeneration projects

Thumbnail Image
Journal Title
Journal ISSN
Volume Title
Insinööritieteiden korkeakoulu | Master's thesis
Real Estate Investment and Finance
Degree programme
Master’s Programme in Real Estate Economics
The evolution of cities creates a socioeconomic system which generates investment opportunities for the actors within real estate sector. These opportunities occur through large scale urban development projects which aim to regenerate wide areas of the city structure. Although the initiative derives mainly from the public authorities, the involvement of the private sector plays a significant role for the success of such projects. However, the complexity of urban regeneration schemes poses definite challenges for a robust and accurate investment analysis. This thesis initially investigates the relation between real estate development and urban regeneration. Thereafter, it examines the approach of the real estate sector, focusing mainly on the perspective of the property developers, by identifying and evaluating the emerging investment potentials in urban regeneration projects. The research methods include a literature review as well as an empirical study from the property market of Helsinki Metropolitan Area. The literature part reviews the theoretical framework of urban regeneration and real estate development and combines their features in a separate chapter. In particular, urban regeneration is examined as an investment process with certain content, context, and organisation; the DCF comprises the prevailing method for the investment analysis. The findings of the literature review indicate the employment of more sophisticated risk analysis methods in order to capture the high complexity and the required flexibility of urban regeneration projects. The empirical study is performed by semi-structured interviews with real estate developers and investors. The results of the case study underpin the findings of the literature review, in terms of capturing latent opportunities and providing higher flexibility in the investment analysis. However, real estate developers believe that this flexibility derives from complex quantitative methods which are hard to grasp and comprise rather an encumbrance than facilitating the decision-making process. The findings of the thesis can be utilised for further research by conducting quantitative analysis on particular projects. This spherical approach can provide a solution in balancing the trade-off between the robustness and the clarity of the investment analysis.
Viitanen, Kauko
Thesis advisor
Vimpari, Jussi
urban regeneration, real estate development, real estate valuation, real options analysis, risk management
Other note